Taxation is vital to a country’s economy, providing essential revenue for public services. India’s tax system encompasses multiple types, including excise duty. Anyone involved in manufacturing or trading goods in India must understand this tax, as it requires meeting specific payment obligations and deadlines.
The government imposes excise duties as an indirect tax on goods manufactured domestically in India. It typically levies this tax at the point of production, applying it to certain goods when they move from the factory to the marketplace. People also refer to excise duties as Central Value Added Tax (CENVAT).
Excise duty differs from sales tax because manufacturers pay it before products reach consumers, and an intermediary (like a retailer or distributor) collects it. The Central Excise Act of 1944 and the Central Excise Tariff Act of 1985 govern this tax. Responsibility for excise duty collection lies with the Central Board of Excise and Customs (CBEC). Although GST has largely replaced excise duties, the government still applies it to specific goods like petroleum and alcoholic beverages.
You may also want to know Form 26QB
The Central Excise (Amendment) Rules, 2002, determine the timing of excise duties payment. Manufacturers must pay excise duties by the 5th day of the month following the removal of goods from the production facility. However, if they pay online through net banking, the due date extends to the 6th day of the following month. For transactions completed in March, they must pay excise duties by March 31.
India’s excise duties are categorized into three main types:
Excise duties apply to:
Certain exemptions are available based on factors like annual turnover, raw materials used, and the manufacturing process. However, entities not meeting exemption criteria must pay excise duties.
Non-compliance with excise duties payment can lead to severe penalties, including:
To avoid penalties, ensure timely payment and accurate calculation of excise duties.
Using the Electronic Accounting System in Excise and Service Tax (EASIEST), managed by CBEC, taxpayers can pay excise duties online:
| Criteria | Excise Duty | Custom Duty |
| Goods | Levied on domestically produced goods | Levied on imported goods |
| Payer | Manufacturer | Importer |
| Criteria | Excise Duty | GST |
| Goods and Services | Levied on manufactured goods only | Levied on both goods and services |
| Timing | Charged with removal of goods from the factory | Charged at the time of supply |
| Return Filing | Filed annually by April 30 | Filed monthly/quarterly, annually by Sept 30 |
| Tax Rate | Generally, 12.36%, varies based on goods | Ranges from 0%, 5%, 12%, 18%, 28% |
| Invoice Matching | Not applicable | Required for Input Tax Credit |
Excise duty remains a significant component of India’s taxation structure, particularly for manufacturers of specific goods. Although GST has largely replaced it, understanding its relevance is crucial for those in the manufacturing sector. By adhering to the excise duties regulations, taxpayers can avoid penalties, support economic growth, and stay compliant with India’s tax laws.
Excise duty is a tax on goods manufactured within a country. In India, it is levied on certain products at the point of production.
Excise duty is imposed on the production of goods, while sales tax is applied at the point of sale to consumers.
Excise duty is paid by manufacturers, entities using hired labor, or those who have goods produced by third parties.
Yes, excise duty applies to a limited range of items like petroleum products and alcohol, even after GST implementation.
Failing to pay excise duty can result in fines between 25-50% of the evaded tax. In cases of evasion above ₹50 lakh, penalties can include imprisonment of up to 7 years.
Get the link to download the App
